EXHIBIT 10.6
Employment Agreement, dated as of July 1, 1999,
by and between Xxxx Xxxxxx and the Registrant.
PERSONAL EMPLOYMENT AGREEMENT
Signed and executed in Rosh Xxxx, as of the 1 day of July 1999
Between: On Track Innovations Ltd. (Reg. No. 52-004286-2)
a private company registered in Israel
of Z.H.R. I.Z., Rosh Xxxx 12000
(the "Company")
of the one part
And: Xxxx Xxxxxx (ID No. 05877527)
of 24 Hartzit St., Carmiel 20100
(the "Employee")
on the other part
Whereas the Employee has been employed by the Company as its President and Chief
Executive Officer (the "Position") and the Company wishes to continue
employing him in the said position, subject to the terms and conditions
set forth below in this Agreement; and-
Whereas the Employee warrants that he has the qualifications and skills required
for the purposes of performing the Position and that there is no
hindrance - legal, contractual or otherwise - for the execution by him
of this Agreement.
NOW THEREFORE, THE PARTIES HAVE AGREED AS FOLLOWS:
1. Nature of the Agreement - General and Applicability
1.1. This Agreement exhaustively prescribes the terms and conditions
applicable to the Employee's employment with the Company and accordingly
no collective or special agreements shall apply to the employment
relations between the Employee and the Company.
1.2. It is hereby warranted and agreed that the Employee has been employed by
the Company since its establishment; however, the provisions of this
Agreement shall only apply to the Employee from July 1, 1999 (the
"Effective date") and thereafter. Until the Effective date, the terms
conditions and provisions relating to the Employee's employment at such
time, and from time to time, shall apply to the Employee and his rights.
The Employee's signature at the margin of this Agreement also
constitutes his confirmation that, save for the amounts (if any)
specified in the appendix annexed to this Agreement as Annex A and
constituting an integral part hereof and that are payable to him is
respect of his employment prior to the Effective Date (in respect of
convalescence pay or leave pay), he has been paid all the amounts of
whatsoever nature due to him from the Company in connection with his
employment with the Company until the Effective Date whether in respect
of salary, social benefits or otherwise, and his signature at the margin
of this contract also constitutes his full and absolute waiver of any
amount due to him (if any) as stated.
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2. The Employee's Duties
2.1. The Employee shall be employed by the Company in the position of
President and Chief Executive Officer. By virtue of the Position the
employee shall be responsible for the day to day and routine management
of the Company and the operations involved therein. In the performance
of the Position, the Employee shall be subject to the directions and
policies prescribed from time to time by the Company's board of
directors.
2.2. For avoidance of doubt, it is warranted and agreed that, without
derogating from the provisions of this Agreement, in the event that any
position whatsoever is imposed upon the Employee which involves
engagement with a subsidiary of the Company and/or other companies
forming or which shall form part of the Company's group (collectively
the "Related Companies"), such position shall not create
employer-employee relations between him and any of the Related Companies
and that notwithstanding any such position, the Employee shall be
considered solely as the company's employee.
3. The Employee's Undertakings
The Employee hereby undertakes:
3.1. To perform the duties and assignments imposed upon him in the scope of
his employment with the Company with devotion, honesty and fidelity,
subject to the Company's policy in existence from time to time, and to
dedicate to the performance of the said duties all his know-how,
qualifications and experience and all thee time, diligence and attention
required for the performance thereof efficiently, with fidelity and in
accordance with the requirements of this Agreement, and to use his best
endeavors in order to advance the affairs and business of the Company
and the realization of its objectives.
3.2. Not to engage, during the Term of the Agreement (as defined in Section
10.1 below), in any engagement not within the scope of his employment
with the Company pursuant to this Agreement other than with the
Company's prior written consent, provided however, that such consent
shall not be required for voluntary, cultural, sportive or lecturing
activities or for holding of securities of any company other than
companies which are in competition with the Company and in which the
employee holds more than 1%. It is acknowledged that the Employee serves
as a representative director of the enterprises in the board of Z.H.R.
industrial zone.
4. Monthly Salary
4.1. In consideration for the Employee's employment and the performance his
other undertakings to the Company pursuant to this Agreement, the
Company shall pay the Employee, by no later than the 9th of each month
in respect of the preceding month, a monthly salary (gross) of NIS in an
amount equal to US$ 13,000 (the "Monthly Salary").
4.2 By no later than December 1st of each year, the Company's board of
directors shall determine the Employee's salary for the following year,
which shall not be less than in the preceding year.
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5. Bonus
5.1. The Company, pursuant to a resolution of its compensation committee of
the Board, in its absolute discretion, is entitled to give the Employee,
in accordance with targets to be determined by such compensation
committee by no later than December 31 of each calendar year ("Year") in
respect of the next Year (but in its first meeting following July 1,
1999 in respect of 1999), a monetary annual bonus (the "Bonus"). In
determining such Bonus, the compensation committee shall relate to the
Company's revenues, and/or the Company's profits, as applicable to the
Employee.
5.2. Without derogating from the provisions of Section 5.1 above, the
Employee shall be entitled to earn an annual additional bonus (the
"Additional Bonus"). The Additional Bonus shall be based on the increase
in the Company's price per share, so that the Employee shall be entitled
to US$ 15,000 for every increase of one percent of the average price per
share quoted for the Company's shares in the last two months of any Year
(in respect of 1999 the last two months of the lock up period) from the
average price per share quoted for the Company's shares in the last two
months of the preceding Year (in respect of 1999--the price applicable
at the IPO. Additional Bonus for fractions of percentages shall be
calculated pro rata. Additional Bonus shall be 0 in case of decrease in
the price per share in respect of any Year.
5.3. The Bonus and the Additional Bonus for each Year shall be paid to the
Employee within 30 days from the publication of the audited annual
financial statements of the Company of such Year.
5.4. When feasible in light of the Company's cash flow and provided it is
justifiable in light of the Company's results as manifested in the
quarterly financial statements of the Company, the Company may make
allowances to the Employee, pursuant to a resolution of the Board, on
account of earned Bonuses or additional Bonuses which allowances shall
be deducted from the Yearly computed amount of Bonus and Additional
Bonus payable to the Employee in respect of the Year in which such
allowances were made (the "Allowances").
6. Car and Additional Expenses
During the term of the Agreement, the Company shall place at the Employee's
exclusive disposal a car for his use and shall provide him with lunch meals
at the Company's premises. All the expenses in connection with the
maintenance and use of the said car shall be borne and paid by the Company,
excluding fines. The Employee hereby undertakes to use the car that shall be
placed at his disposal as aforesaid reasonably and properly qua an owner who
cares for his property, and in the absence of another arrangement in writing
between him and the Company he undertakes to return the said car to the
Company immediately upon the termination of the Adjustment Period (as defined
in Section 10.2.1.4 below) his employment with the Company. For avoidance of
doubt, the company shall gross up the value of the benefit to the Employee in
placing the car at his disposal and providing him with meals as aforesaid in
the amount of the tax applicable to him is respect of the said benefits.
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7. Annual Leave, Sick Leave, Convalescence Pay, Military Reserve Service
7.1. The Employee shall be entitled to payment of 24 (twenty four) annual
leave days in respect of each year of employment pursuant to this
Agreement.
7.2. The annual leave days to which the Employee is entitled are accruable
and redeemable - but provided always that the Employee shall not be
entitled to accrue in any working year seven of the annual leave days to
which he is entitled and in total the Employee shall not be able to
accrue more than 100 days for the purposes of redemption and 30 days for
the purposes of taking actual leave.
The exact periods of such annual leave shall be coordinated with the
Company's administrative officer.
7.3. The Employee is entitled to sick leave and sick pay at the rates and
times prescribed by law. Sick leave shall not be redeemable. The
Employee shall be entitled to accrue up to 90 (ninety) days for the
purpose of taking actual sick leave. The Employee shall be entitled to
convalescence pay at the rates and times prescribed by law.
7.4. During the period of military reserve the Employee shall be entitled to
receive his full Monthly Salary and the other benefits payable to him
pursuant to this Agreement. The Employee shall remit to the Company
every amount that shall be paid to him for his service as aforesaid from
the National Insurance ("hebrew translation").
8. Executives' Insurance and Vocational Studies Fund
8.1. The Company shall continue the Employee's existing executive insurance
policy in the Employee's name. Each month during the Term of the
Agreement the Company shall transfer and pay to the executive insurance
policy the following amounts:
8.1.1. An amount equal to 8-1/3 (eight and one third percent) of the
Monthly Salary on account of the severance pay fund.
8.1.2. An amount equal to 5% (five percent) of the Monthly Salary on
account of provident fund.
8.1.3. An amount of up 2.5% (two and a half percent) of The Monthly
Salary on account of loss of working capacity insurance.
Furthermore the Company shall deduct from the Monthly Salary an amount
equal to 5% (five percent) which shall be remitted to the said executive
insurance fund such being on account of the provident fund and in
respect of the Employee's part of the provision to the said fund.
8.2. In addition to the aforesaid provisions to the executive insurance
policy, the Company shall make a provision each month of an amount equal
to 8-1/3 (eight and one third percent) of the Monthly Salary on account
of supplementing the severance pay prescribed in Section 8.1.1 above to
an amount equal to two monthly salaries for each year of actual
employment. This additional amount shall be paid by the Company to the
Employee at the time and in the event that the Employee is entitled to
payment of the severance pay prescribed in Section 10.2.1 below.
8.3. It is hereby agreed that the above arrangement regarding the executive
insurance policy, is made in accordance with the general permit relating
to employer's payments to pension funds and insurance funds, instead of
severance payment under Section 14 of the Severance Pay Law 5723-1963
(the "Severance Pay Law") and thus, save if the event of termination
pursuant to Section 10.2.2 below, and save if the Employee has drown
funds from the executive insurance policy not due to a Qualifying Event
(as defined in GN 4575 - 5758), the Company waives any and all rights
for return of the amounts paid by it to the executive insurance policy
and such payments shall be deemed as being in lieu of severance pay as
specified in the Severance Pay Law (GN 2787-5742, 993; GN 2847- 5742,
2939; GN 4575-5758).
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9. The Company shall attend to making a vocational studies fund in the
Employee's name and shall make a provision each month to the said vocational
studies fund of an amount equal to 7.5% (seven and a half percent) of the
Monthly Salary. Furthermore, an amount equal to 2.5% (two and a half percent)
of the Monthly Salary shall be deducted from the Monthly Salary, such being
in respect of the Employee's part of the provision to the vocational studies
fund.
10. Term and Termination
10.1. This Agreement is for a term of five (5) years commencing on the
Effective Date and terminating on June 30, 2004. This term shall be
automatically extended (without limitation), or terminated by the
Company for reasonable and justifiable cause or by the Employee by
serving the other party with at least six (6) months' prior written
notice (the "Prior Notice Period"). Following such notice. The
Employee shall continue in his Position and perform his undertakings
pursuant to this Agreement during the Prior Notice Period, and, at the
Company's request he shall use his best endeavors to transfer his
Position in an efficient and orderly manner to his successor within
the Prior Notice Period. Notwithstanding the above, it is hereby
warranted and agreed that the Company shall be entitled at any time,
in its discretion to demand that the Employee terminate his Position
forthwith (or within a period shorter than the Prior Notice Period)
and in such event the employer-employee relations between the Company
and the Employee shall terminate on the date designated in the said
demand, all without derogating from the Employee's rights pursuant to
this Agreement and at law to payment in lieu of prior notice in
respect of the Prior Notice Period, to severance pay and to all other
amounts due to him (if any) in connection with his employment and the
termination of his employment with the Company (and the period in
respect of which employer-employee relations actually existed between
the Company and the Employee pursuant to the above provisions is
hereinafter referred to as "The Term of the Agreement"). Termination
of this Agreement by the Company for unreasonable and unjustifiable
cause shall be deemed a material breach of this Agreement.
10.2. In the event of termination of this Agreement, the following
provisions shall apply:
10.2.1. Should the termination of the employment be as a result of
dismissal (other than dismissal in circumstances depriving the
Employee of the right to severance pay as provided in Section
10.2.2 below), the Employee's resignation or, heaven forbid,
as a result of circumstances preventing the continuation of
his employment with the Company (including his death), the
Employee shall be entitled (or, as the case may be, his heirs
shall be entitled):
10.2.1.1 to receive the Monthly Salary from the Company for
the Prior Notice Period, such being whether the
Employee was requested to continue working during the
Prior Notice Period or otherwise; and
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10.2.1.2 to receive, following publication of the financial
statements relating to the year during which such
termination has occurred, pursuant to Section 5.3
above, the amounts of the Bonus and Additional Bonus
payable to him (if at all) pursuant to Section 5
above in respect of such part of the year in which
the Employee has been actually employed with the
Company, as shall be pro rata calculated from the
yearly Bonus and Additional Bonus, computed pursuant
to Section 5.1 and 5.2 above.
10.2.1.3 to receive from the executives' insurance fund and
the vocational studies fund all the amounts which
have accrued to his benefit in such funds, whether
from his own provisions or from provisions of the
Company and/or the Related Companies, including all
linkage differentials, interest and profits that have
accrued in the said fund in respect of the said
provisions.
10.2.1.4 to receive the Monthly Salary and all benefits
granted to the Employee pursuant to this Agreement
excluding Bonus and Additional Bonus payments
pursuant to Section 5 above, from the Company until
June 30, 2004, notwithstanding any prior termination.
10.2.1.5 In the event that termination notice is given after
December 31, 2003, the employee shall be entitled to
receive the Monthly Salary from the Company and all
benefits granted to the Employee pursuant to this
Agreement excluding Bonus and Additional Bonus
payments pursuant to Section 5 above, in respect of
an additional adjustment period of six (6) months,
following termination of the Prior Notice Period (the
"Adjustment Period "). For avoidance of doubt, the
Employee shall not be entitled to receive payments
pursuant to both Sections 10.2.1.4 and 10.2.1.5 in
respect of the same month.
10.2.2. It is hereby agreed and warranted that in the event that the
Employee's dismissal is as a result of a breach of fidelity or
material breach of his confidentiality or non competition
undertakings to the Company pursuant to Section 11 below and
Annex B hereto or dismissal in other circumstances depriving,
according to any law, the Employee of the right to severance
pay, then, notwithstanding anything to the contrary provided
in this Agreement, the Employee shall not be entitled to
receive prior notice of his dismissal or payment in lieu of
prior notice and he shall not be entitled to severance pay or
any other payment which the Company is not legally bound to
pay, including any payment due to the Employee as a Bonus
payment or any payment in respect of the Adjustment Period. In
such event, the Employee shall be obligated to reimburse
Allowances which were granted to Employee pursuant to Section
5.3 above in the last Year of the Employee's employment with
the Company, and subject to applicable law, the Company shall
be entitled to set off the amounts of such allowances from any
payments due to the Employee from the Company.
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11. Confidentiality and Non-Competition
11.1. The Employee has signed a confidentiality undertaking towards the
Company which is attached as Annex B hereto, and forms an integral
part of this Agreement.
11.2. The Employee undertakes that during the term of his employment with
the Company and for a period of 24 (twenty four) months following the
termination of the Employee's employment with the Company, he shall
not:
11.2.1. engage, directly or indirectly, with any customer of the
Company or the Related Companies (whether as employee,
consultant, self-employed or otherwise) in any matter relating
to the Company's or the Related Companies' business unless in
the framework of his employment with the Company.
11.2.2. engage, directly or indirectly, for whatsoever reason, in
Israel or anywhere else, in any business, position employment
or other engagement whatsoever in the sphere of contactless
smart cards which competes with the Company's business.
12. Further Provisions
The Employee hereby warrants that he is aware and agrees that:
12.1. In the scope of his Position with the Company pursuant to this
Agreement, he is not an employee to whom the Hours of Work and Rest
Law, 5711-1951 applies, and he shall not be entitled to claim or
receive any payments or increments whatsoever for working overtime or
on Sabbaths and festivals, and the monthly salary payable to him as
aforesaid also includes full compensation for working overtime and on
Sabbaths and festivals.
12.2. The amount of the Monthly Salary payable to him as specified in
Section 4 above, and it alone, shall be the basis for the provisions
and deductions in respect of the social benefits specified in this
agreement; and all the bonuses, contributions to expenses and other
benefits granted to him or which shall be given to him (if at all)
pursuant to this Agreement or in connection with his employment by the
Company do not constitute a component of his Monthly Salary and shall
not be taken into account in respect of the provisions or other
benefits whatsoever granted to the Employee pursuant to this Agreement
which are computed on the basis of his Monthly Salary; and the
expression the "Monthly Salary" wherever it appears in this agreement
refers to the Monthly Salary as defined in Section 4 above, without
any increments whatsoever.
12.3. The payments and benefits of whatsoever description granted to the
Employee pursuant to this Agreement are subject to the deduction of
income tax and other compulsory deductions which the Company has to
deduct according to any law, and nothing stated in this Agreement
shall be interpreted as imposing upon the Company the burden of paying
tax or any other compulsory payment for which the Employee is liable,
other than the value of the benefit of placing the car at the
Employee's disposal and providing the Employee with meals, which shall
be grossed up by the Company as provided in Section 6 above.
12.4. Except in relation to the grant of options to the Employee by the
Company, the terms and conditions of the Employee's employment by the
Company are regulated solely pursuant to this personal employment
agreement between him and the Company and save as expressly provided
in this Agreement the Employee shall not be entitled to any payments
or other benefits in respect of his employment and the termination of
his employment with the Company.
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13. Amendments to the Agreement
An amendment to this agreement shall not be valid unless made in a written
document duly signed by the parties hereto.
14. Addresses
The parties' addresses for the purposes of this agreement shall be as
specified in the heading hereto and any notice, document or court process
sent by one party to the other according to the above addresses shall be
deemed to have reached its destination: if delivered by hand - at the time
of delivery, and if dispatched by registered post - after 72 hours have
elapsed from the time of dispatch as aforesaid.
IN WITNESS WHEREOF THE PARTIES HAVE SET THEIR HANDS:
/s/ ON TRACK INNOVATIONS LTD. /s/ Xxxx Xxxxxx
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ON TRACK INNOVATIONS LTD. EMPLOYEE
